Strategic Human Resource Management - Essay Example

Strategic Human Resource Management Name: Course: Institution: Instructor: Date: Introduction In today’s economy, businesses are driven by aggressive market conditions and as such, they are obliged to include in their strategic goals aspects such as enhanced productivity and quality, continuous innovation, improved flexibility and capability to respond rapidly to turbulent market conditions (Clardy 2007). Sustaining competitive advantage by either being a less costly leader or a differentiator requires acquisition and retention of highly dedicated and knowledgeable workers. Not only does competitive advantage entail implementing cost-effective practices and strategies, but also tapping firm’s core competencies and rapidly responding to customer’s requirements and opponent’s moves. This role can be achieved effectively by human resource management through scanning internal and external environments (Kogut & Kulatilaka 2001). Human resource management can supply competitive intelligence for strategic planning and information concerning the company’s internal strengths and vulnerabilities for devising strategic plans. In this way, it is true to argue that strategic human resource management (SHRM) remains a key contributor to organizational competitive advantage. It even goes further to connect human resource management issues to the overall organizational strategy, to link human resource policies to corporate strategies and to reinforce organizational culture, all of which lead to sustained competitive edge that cannot be copied by competitors. All these aspects of human resource management can be summed up using a quote from Ulrich and Brockbank. “According to Ulrich and Brockbank, HR managers are able to see ‘the world through employee’s eyes’ and act as their representative, while at the same time looking through customers’, shareholders’ and managers’ eyes and communicating to employees what is required for them to be successful in creating value” (2005: 201 in Brown et al., 2009). This paper aims to discuss this quote from strategic HR perspective, distinctive and core competencies, competitive advantage and sustained competitive advantage. Strategic Human Resource Approach The effects of globalization on businesses have necessitated the need to recognize and evaluate means in which organizations can carry out their operations now and in the future. Faced with inadequacies inherent in conventional human resource management, organizations have resorted to use of SHRM as a pillar for gaining organizational productivity and performance. SHRM refers to the pattern of designed allocation of human resources and activities with the aim of enabling an organization to accomplish its goals. It is concerned with ways to sustain firm’s intended plans, with the steadiness and specificity of tasks needed from human resources and make informed decisions about the extend of relationship between the human resources and the organization. Primarily, SHRM aims to create high performance human resource management tasks that create value to the core competencies of an organization. According to Schuler and Jackson (2007), such tasks include a) identifying high performance HRM practices, re-engineering business, developing organizational learning, implementing transformational leadership and evaluating success of HR. SHRM remains one the most significant ways in which HR managers can use eyes of workers to observe the competitive environment. From a 5-P theorist, SHRM enables managers to mould human resources practices with strategic requirements. Such requirements consist of overall organizational strategy for achieving leading competitive edge (like survival, profitability and adaptability etc) in the market. According to the theory, overall strategies determine human resource practices and policies once the business level plan has determined and HR plan is usually adopted to support the desired competitive advantage (Schuler and Jackson 2007). As a result, HR strategy is more apprehensive with the challenge of fitting the 5-Ps (policies, practices, processes, programmes and philosophy), which inspire and strengthen the variant workers’ role attitudes suitable for every competitive strategy. In drafting the HR strategy, the SHR personnel needs to use eyes of customers, investors and managers to look at essential information and resources that need to be included in the HR strategy. For instance, Sears is one company that relies on SHR to align its human resource strategies with overall business strategy. It has developed SHR model that integrates 3-Cs to mean “compelling place to work, compelling place to invest and compelling place to buy” (Kirn et al 1999, p.330). Core Competency This refers to an ability that is essential to an organization’s value creating operations (Weiwei & Jianping 2008, p.63). It forms the basic proficiency that an organization can use exceptionally, with little effort and less costs to maintain its competitive edge in the market. For instance, human resources form a core competency for many organizations because they create value and produce better organizational performance compared to that of competitors. Some ways in which HR personnel can see better organizational performance through the eyes of workforce include recruiting and retaining employees with distinct professional and technical abilities, endowing in training and advancement of those employees and paying them in ways that make them feel competitive with workers in other firms. However, the ability of SHR managers to use employees as lens for core competency depends on their efforts to align organizational strategy with organizational culture. This indicates that the firm’s overall strategy needs to be instilled into the workers as part of the shared values and beliefs that give them organizational meaning and behavior. Otherwise, incompatibility between the two can negatively affect strategy, thereby undermining position of human resources as core competency. As employees’ representatives, SHR managers serve as advocates on behalf of employees to the managers. They represent workers’ concerns, problems and issues to the management. Since managers are mostly involved in formulating overall strategy of the firm, HR professionals are able to understand desired organizational goals through the management. In most cases, customers remain the focus of product or brand development by businesses. They dictate to the organizations what features, characteristics and other product details they need to be integrated into the products. For the organization to achieve this, SHR professionals need to integrate such aspects in deciding what qualifications to include in the recruitment programs or what new skills they need to include in the training and development programs. As Kogut and Kulatilaka (2001, p.751) point out, the recognition and assortment of core capability is determined from the external market conditions. On the other hand, investors provide HR managers with desired organizational performance and productivity, which in turn dictates to the managers the kind of individuals required to achieve such performance. Distinctive Competence This pertains to a unique advantage that a firm enjoys or distinctive feature that the firm can develop to create a special position in the market. It forms an integral basis upon which organizations can rely on in determining the course of action around which resources could be channeled to gain competitive edge. Distinctive competence differs with core competence in that it must be noticeable by individuals external to the organization. However, it refers to an ability that a firm can accomplish effectively and exceptionally such that it will be recognizable by outsiders. According to Mooney (2007, p.111), core competence should be an ability, idiosyncratic, noticeable to consumers and not easy to duplicate. For instance, Coca Cola Company’s brand ‘coke’ is a distinctive competence that the company uses to control its competitive edge in the soft drink industry and is also easily differentiable from other competitor’s products in the market by consumers. As distinctive competence closely relates to core competence, HR managers see it through the same employees’, managers’, investors and customers’ eyes in which they see core competence. Competitive Advantage Commonly abbreviated as CA, it refers to a spot that an organization takes up in its aggressive environment. It exists when a firm’s earnings significantly exceed their costs. This implies that usual competitive conditions are incapable of driving down the organization’s earnings to such an extend that they cover all expenses and just provide enough extra return to keep the capital invested. Achievement of competitive advantage is based on the possession of precious resources that facilitates the firm to carry out its activities less costly or better than its opponents. As Barney (1991, p.101) argues, such resources may include “firm’s practices, knowledge, information, processes, assets and capabilities’ etc, which all help an organization to design and execute plans that contribute towards organizational success and competence. For instance, General Electric enjoys competitive advantage because of its ability to tap diverse resources to distribute its products as many customers as possible (Mooney 2007, p.112). To attain competitive advantage, an organization needs to make a choice about the type of competitive edge it intends to achieve and the scope within which it will accomplish it. From a behavioral perspective, such competitive advantage will only be achieved if there is close match between HR strategy and organizational strategy. This is achieved through SHRM to identify behaviors that are required to direct efforts of workers towards the preferred competitive position and adopt those HR practices that reinforce these behaviors (Clardy 2007, p.345). In this sense, HR managers see the world of competitive advantage through the eyes of the workers. Although it is the HR managers that identify the required behaviors, it remains the responsibility of workers to observe the established HR practices that will ensure that the company achieves the desired competitive position. Moreover, workers have an opportunity to contribute their ideas and concepts during the formulation of practices since SHR approach considers the concept of transformational leadership. Through such ideas, HR managers are in a position to understand HR issues that need to be integrated into the practices in order to lead the organization in achieving competitive advantage. However, competitive position in a market cannot be solely based on employees, but it also requires taking into account views of investors and customers. As a result, HR managers need to see competitive advantage through the eyes of customers and stakeholders in order to formulate HR behaviors and practices that create value for the customers and shareholders. For instance, if an organization’s desired competitive position is to create unique and quality product that will be easily differentiated in the market by customers, HR should consider preferences of customers and in turn, develop and implement HR practices that integrate such preferences. On the other hand, investors are interested in business practices that create value for their investments in terms of improved returns. Thus, HR managers will require this kind of information from investors in order to formulate HR practices that will lead the organization towards the preferred competitive position in the market while at the same time ensuring cost-effectiveness to maximize returns to the investors (Clardy 2007). Sustained Competitive Advantage Commonly abbreviated as SCA, it refers to a competitive advantage created when organizational value-creating processes and positions cannot be copied or imitated by opponent firms so that the firm receives an above-normal economic advantage. According to Barney (1991, p.102), an organization achieves SCA when it is using value creation method that is not concurrently being used by any “current or potential” opponents and when these opponents lack capacity to copy advantages presented by this method. From a resource based approach, human resources remain one of the sources of SCA because they create value, rarity, cannot be substituted by other resources and cannot be duplicated. In addition, distinct historical characteristics, social complexity and casual ambiguity characterize human resources. These three conditions limit organizations from achieving SCA using HR practices that have been successfully used by another firm. Distinct historical characteristics limit repetition of successful HR practices because of time and place. On the other hand, casual ambiguity limits HR immitability because some aspects of HR such as culture are taken for granted and there is more than one resource working together as a team. Social difficulty arising from interpersonal interactions, customers’ satisfaction and suppliers’ reputation also contribute to attainment of SCA. The objective of achieving SCA remains one of the core functions of SHR managers. Although there are various ways in which SHR managers can see SCA through the eyes of workers, knowledge management and organizational learning present two useful methods for accomplishing this. Knowledge management refers to the comprehensive and procedural process that identifies, gathers, captures, indexes, organizes, stores, integrates, shares and retrieves organization’s capital (Schuler & Jackson 2007, p.89). Such capital can either be explicit (organizational culture, policies, standard operating procedures and databases) or tactic (workers, their competence and experience). Therefore, HR managers through knowledge management are able to see SCA because such knowledge and information is stored and shared among employees, implying that it will be used for creativity within the organization for long time. Google, Inc is one of the companies whose HR managers rely on knowledge management tools to sustain the company’s competitive edge in the internet industry. SHR managers can also ensure SCA through adopting organizational learning philosophy among human resources. HR managers can create a work environment that encourages organizational learning by developing training manuals, encouraging team work and exchange of information (Kirn et al 1999, p.332). Through this, they are able to ensure adaptability and flexibility of the workforce to respond rapidly to changing market conditions and in turn, sustain their competitive advantage. However, these two aspects alone cannot help HR managers to observe SCA through eyes of workers. Additionally, they need to act as employee’s representatives so as to motivate and retain them in the organization. Various ways in which HR managers can represent employees and motivate them towards SCA include design and implementation of equitable and high pay, incentive compensations, inclusive participation and empowerment, wage compression, promises of promotion and career advancement and offering employment security etc. In this way, employees will feel that their continued efforts are appreciated and in turn, continue working at the same level or improve their performance leading to SCA. Moreover, continued collection of information or feedbacks remains essential if HR managers aim at implementing knowledge management and organizational learning approaches that create sustained value for the customers. As the lifestyle or market conditions change, so does customer preferences. Therefore, the HR personnel need to identify key information from customers’ feedbacks and integrate the required changes into HR strategies to continually reflect choices of customers. In addition, consultations with managers and investors are essential if HR personnel need to formulate practices and behaviors that persistently match with interests of such parties. For instance, managers need to be informed of desired pay structures that HR personnel need to implement. Otherwise, this may result to organizational conflict that may greatly impair achievement of organization’s SCA. Conclusion SHRM refers to the pattern of designed allocation of human resources and activities with the aim of enabling an organization to accomplish its goals. It remains one the most significant ways in which HR managers can use eyes of workers to observe the competitive environment because it enables them to mould human resources practices with strategic requirements. Core competency forms the basic proficiency that an organization can use exceptionally, with little effort and less costs to maintain its competitive edge in the market. Distinctive competence differs with core competence in that it must be noticeable by individuals external to the organization. Some ways in which HR personnel can realize both competencies through the eyes of workforce include recruiting and retaining employees with distinct professional and technical abilities and endowing them through training and development. From a behavioral perspective, competitive advantage will only be achieved if there is close match between HR strategy and organizational strategy. SCA refers to a competitive advantage created when organizational value-creating processes and positions cannot be copied or imitated by opponent firms so that the firm receives an above-normal economic advantage. Although there are various ways in which SHR managers can see SCA through the eyes of workers, knowledge management and organizational learning present two useful methods for accomplishing this. 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